Reference no: EM131550464
What have I signed up to?
Fleet Care (from Week 4) offers a maintenance program for fleet operators of light and medium duty commercial vehicles. Their program charges a flat monthly fee to a covered customer based on the type of vehicles in their fleet, existing miles on each vehicle, the number of vehicles and the average annual mileage. The program covers routine maintenance and repair (other than due to accident) including parts and labor. Fleet Care's standard rate is based on $.25/mile multiplied by the fleet size, and they require an enrollment fee for each covered vehicle of either $.25 x actual miles on the vehicle or $1,000, whichever is lower.
Just-for-Kicks operates a chain of tae kwon do studios with a large after school program, and they operate a fleet of 12 small school-type buses to pick up children from school and take them to one of Just-for-Kicks' studios. They are interested in getting their buses covered by Fleet Care.
Fleet Care sends, Jim Slick, Regional Head of Sales, to meet with the Director of Afterschool Activities at Just-for-Kicks, Max Payne. They exchange business cards with each other, which shows their titles. Slick presents a quote to Payne for $12,000 enrollment plus a monthly fee of $3,000. Payne likes the monthly charge, but says that the enrollment fee is much too high. The owner only authorized Payne to spend up to $4,000 to sign up, although he does not share this with Slick. Slick tells Payne that it is a standard formula, and Payne gets irate, demanding that Slick cut it in half. Slick feels some pressure, but knows that he is not authorized to discount the enrollment without prior authorization from HQ. On the other hand, he really needs this sale to meet his quota and offers to cut the enrollment to $8,000, with the idea that he'll get it approved after the fact. Payne accepts the $8,000 enrollment, and they both sign a maintenance contract on the spot.
Scenario A: One week after signing the maintenance contract, Fleet Care sends Just-for-Kicks and invoice for the $12,000 enrollment fee. Fleet Care rejects the invoice with a response that they have a maintenance contract with Fleet Care with an enrollment fee of $8,000, agreed by their sales rep, Jim Slick. The Fleet Care Accounting Manager informs Just-for-Kicks that Jim Slick was not authorized to discount the enrollment fee, and he has since been fired. In this scenario, how much is the enrollment fee, and why?
Scenario B: One week after signing the maintenance contract, Fleet Care sends Just-for-Kicks and invoice for the $8,000 enrollment fee. Fleet Care rejects the invoice with a response that they are not under a maintenance contract since Max Payne was not authorized to agree to that much of an enrollment fee, and he had no signature authority to enter into contracts for Just-for-Kicks. In this scenario, is Just-for-Kicks obligated to pay the invoice or not, and why?